YNAB You Need A Budget

[pksublime]

Inserting HEX into everyday conversation ALWAYS produces hilarity!

Lest no one forget the age old adage, "There are 10 kinds of people in this world; those that understand binary and those that don't."

[marvelous]

"There are 10 kinds of people in this world; those that understand binary and those that don't."

I sorta missed the hexadecimal, but knew it wasn't money. Totally got this! (Math teacher.)

I think YNAB and Dave Ramsey are nice compliments. I am a DR fan because that is what got us to where we are today. We are on BS3 with our FFEF more than 75% funded. We definitely needed the straight forward talk with Christian emphasis to get us going. I am almost sure that YNAB 4 rules would not have been enough for DH. He needed something major to get on board. The Finanical Peace University class along with the outreach minister at our church was the "kick in the pants" he needed.

Really I look at YNAB as a tool to implement DRs steps. I like that they both teach budgeting every dollar (zero-based budget) But I love that YNAB tracks the leftover or deficit and I know how to budget or adjust the next month. That has been fantastic for us. I use to budget with pen and paper and just let the overages build up in the checking account without really knowing how to keep track of it. Now I know exactly where even those dollars are going. Keeping track of sinking funds is really easy too.

The buffer is a gray area for me. Since we are already so far along with the BEF finished and FEFF almost finished, I haven't put much effort into the buffer. We have a buffer, but we are not a month ahead. Right now I am putting all my effort into finishing the FFEF. I may come back to this though as I like being able to pay things as they come.

DR may "speak" more to some and YNAB to others but I think they go rather nicely together.



I

[shiny-pebble]

I read Total Money Makeover a long time before I found YNAB. I like the concept, I agree with the concept for the most part, but the plan hasn't quite worked for me. It may work better if I didn't have to keep spending my baby emergency fund every damn time I get it up to $1000 (I swear. It's like that number triggers some sort of cosmic thing that makes my car break down). But the other thing is that it's very intense, and I completely understand why it is that way, but I am bad at intense. It makes me nervous and upset and touches off bad things when I screw it up, which I inevitably do (I inevitably screw most money related things up, though, so I shouldn't be surprised. I am the girl who's done six new YNAB files within the first four months of using the program after all).

So, having recognized that my personality just clashes with the plan, I"m working on my own system, which will likely combine the YNAB rules (because I *get* those) with some DR aspects and probably some David Bach concepts and other stuff I've gathered from reading PF blogs. It's a work in progress, but I'm all right with that.

[bobc511]

Hi,

I listen to Dave Ramsey whenever I am in my car and he is on. He has great advice, and I would be interested in any feedback you get. I have not ordered Dave's material, I should have, but I think this will work just about as well. Anyhow I am brand new to YNAB and am serious about getting my financial house in order, I have screwed way too much already. I am not a disaster, but I am not making progress either.

Love to hear back from you.

God bless and keep soaring,
Bob

[Mudie]

Hi Bob, welcome to YNAB and the forums.

Yes, Dave is great and I listen to him too (sometimes a little too much my wife says ). I think you'll find that YNAB and Dave work very well together. If you have any questions about getting started feel free to ask and if you haven't been there yet, take a look at the important links thread (the link is in my signature below).

Steve

[Baxalot]

Chiming in a little late here (and I think this is my first post?) but I just had to speak up and say that I agree that YNAB is a fantastic complement to Dave Ramsey's baby steps. In fact, I wish I had YNAB from the beginning of working the baby steps. The budget is such an important thing to conquer if the baby steps are going to work at all. And it was my one serious weak point. I just couldn't get the hang of it. I am a numbers person, but I would just constantly forget certain expenses and then the whole thing would fall apart and I'd give up and promise myself to do better the next month.

I love the way YNAB forces you to categorize everything. So the first few months I had to keep creating new categories for things I forgot, but now they are all funded. Doctor co-pay? Already in there. Will stay in there until it is used. Car registration? Got it. Oil change money? It's in there until I need one, then I start funding it again the next month. So I guess what I'm saying is that it has really helped me get my sinking funds in there as part of the budget so I don't have any "oops I forgot about" moments. This month I was able to go out and get all of the kids school supplies without hurting anything because I had been funding the school supplies line for a few months. Same thing with soccer registration. And now I can start funding Christmas.

I also have much more succes squeezing pennies from the budget to put toward debt than I used to. I have a certain amount that I pay toward credit cards at the beginning of the month but so far I've always been able to squeeze out some more money at the end of the month when I see which categories I've underspent in. And I can do that with confidence knowing that the budget is sound and I'm not going to forget about anything that needs to be paid. Hopefully with any luck I'll be debt free (besides the house) by the end of '08!

[Mudie]

Hi Baxalot, welcome to the forums.

I'd say "welcome to YNAB" as well but it looks like you have been using it a while and have a firm grip on it. Like you, I could just not "get" the budget until YNAB. I don't expect Dave to change his old school budgeting approach anytime soon but if he were, and in the process endorse YNAB, Jesse would be rich overnight with DR's listener base.

Hopefully with any luck I'll be debt free (besides the house) by the end of '08!

Now THAT, is awesome news, good for you.

I'd like to join you then but I'm afraid we have a ways to go further than this year before I can stake that claim but thanks to YNAB, it will happen.

Steve

[MALMomma]

I need to read through this entire thread, but I'm working from home right now, so really need to get back to work! LOL however, I have to say now that I'm using YNAB, I have more of an interest in the DR way. I looked at it before, but it didn't make sense to me back then. Now, with our BIG HUGE relocation goal of 2009, I am very interested! I'd love to be able to pay down ALL of our debt, including my beloved 2003 Odyssey (bought Honda pre-owned at a great price!). I would further love to pay off our new home's mortgage quickly, while still saving for retirement, vacations, and our 3 kids' college education (7, 5, and 1 yo).

Seems like DR might be a good way for us to go once we get rolling with our buffer!

[domino]

I also have much more succes squeezing pennies from the budget to put toward debt than I used to. I have a certain amount that I pay toward credit cards at the beginning of the month but so far I've always been able to squeeze out some more money at the end of the month when I see which categories I've underspent in. And I can do that with confidence knowing that the budget is sound and I'm not going to forget about anything that needs to be paid. Hopefully with any luck I'll be debt free (besides the house) by the end of '08!

Exactly why DR insists on a written budget and getting current with bills prior to starting the baby step process. In his book Financial Peace Revisited, DR cites that 90-95% of American households operate without a detailed budget. Learning to manage money "on paper, on purpose" (as DR is fond of saying) is the cornerstone of this advice, and is why he spends so much time in his books and courses on the topic budgeting. Anyone that thinks DR is light on budgeting hasn't really tuned into his message yet.

Aside from the not-so-minor issue of the buffer, the real difference (in my opinion) between DR and YNAB are the overall goals of each system. Quite matter-of-factly, with YNAB you win if you successfully manage the cash flow aspect of your financial plan, well thought out or not. With DR's baby step process, you win if you're completely debt free, have a comfortable emergency savings, are funding your retirement and children's educations at proper levels, and have so much discretionary income that you can start building wealth and giving some of it away. Or, rephrasing a thought someone already shared, YNAB = tactics, DR = strategy. I'll take one of each please.

[Baxalot]

Yes, I agree that Dave stresses the importance of a budget before starting the steps. I agreed with him in my head, but couldn't make a budget work until I found YNAB. I never had success with pencil and paper budgets or other spreadsheets that I created myself. YNAB allowed me to conquer the budget issue which in turn greatly helps me move through the baby steps with more confidence.

[Mudie]

Learning to manage money "on paper, on purpose" (as DR is fond of saying) is the cornerstone of this advice, and is why he spends so much time in his books and courses on the topic budgeting. Anyone that thinks DR is light on budgeting hasn't really tuned into his message yet.

I wouldn't go so far as to say "DR is light on budgeting" but what seems drop dead simple to him is not always understood so well by the masses. I've listened to hundreds (thousands?) of hours of DR's show, all of the FPU CDs, own and have read Financial Peace, Financial Peace Revisited, and The Total Money Makeover. I've even worked as a volunteer at one of his live events and got to meet him. Yet with all of that I simply could not get my head around, or perhaps a better way to say it is I could not get his approach to budgeting to work for me. I know the mantra all too well; "On paper, on purpose" but the whole idea that I could somehow take our finances from a true paycheck-to-paycheck existence and make it better simply by putting down what I THINK I'm going to make alongside what I'd like/needed to spend with no mechanism in place to cushion the blow when we messed up just never seemed to work for us.

Along comes YNAB with 4 simple rules, focused like a laser on budgeting and the rest is history.

Without the solid foundation of a budget that we understand and can work with, the rest of DR's plan could never get off the ground. Yes, he pushes the need for a budget so much it's like a parrot but his real focus and goal is on the baby steps.

I guess it all comes down to the individual, I've seen many many times where a newbie will arrive here on the forums stating something along the lines of "The way YNAB sees money is just like my thinking." Well in our case anyway, the spending management (the term "cash flow" never seemed to make sense to me) that YNAB helps us to do has been the key to finally moving on and into the DR baby steps.

So perhaps YNAB could be considered baby step 1 with a twist.

1. YNAB budget in place with full buffer! - (Thus eliminating $1,000 to start an Emergency Fund since the buffer can be drained if need be to cover a "baby" emergency)
2. Pay off all debt using the Debt Snowball
3. 3 to 6 months of expenses in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give!
8. Invest in mutual funds and real estate

Or, rephrasing a thought someone already shared, YNAB = tactics, DR = strategy. I'll take one of each please.

I can live with that, and I'd like both as well please.

Steve

[Mudie]

Yes, I agree that Dave stresses the importance of a budget before starting the steps. I agreed with him in my head, but couldn't make a budget work until I found YNAB. I never had success with pencil and paper budgets or other spreadsheets that I created myself. YNAB allowed me to conquer the budget issue which in turn greatly helps me move through the baby steps with more confidence.

Exactly!

Steve

[JillH]

Me too, I would always have a different amount.

This software makes it a lot easier than my messy spreadsheets or moving stuff around in Quicken.

[MALMomma]

Ok, I had a chance to read through all of this. I have to say, it's pretty inspiring. I don't know that I would sign up for DR, but I think I can apply some of the principles that have been mentioned. I just popped all of our debt into Calc and added it up. $26,115. This includes my Odyssey loan (have paid off DH's car already), but doesn't include the home equity loan. It's mind boggling when you add up the total debt! Not only that, but scary as anything. I don't like it!!!

Although I would love to get crackin' on the Baby Steps, we have a different situation here. Relocating next year (hopefully!!!) and saving for that is more important than paying off debt & our FFEF. I'm heading towards the buffer (BEF, right?). Plan is to pay minimums on two of the major cards we have. Our Home Depot card will be paid off by November and my Dell laptop will be paid off by May at the very latest. (Both are 0% interest as long as we pay them off by those months. No problem!)

Think I'm going to ponder the BS and the Rules and see how I can best implement them in our current situation. Also going to see how we can make them work after a relocation.

Thanks so much for a wonderfully chock full of info thread, gang!

[domino]

Perhaps the difficulty most people have with DR's budgeting philosophy is it is by design extremely focused, or even restrictive depending on your level of acceptance towards DR's principles. Just take a look over on LLNOE for those asking for help with establishing their budgets and you'll see a lot of criticism over non-essential items that take money that could otherwise go towards working the plan.

When the overall goal is to whittle the budget down to beans & rice so that you can get "gazelle intense" about the baby steps, then budgeting becomes more a matter of the discipline required to keep at it than the simple math needed to set it up. Granted, DR's advice on budgeting isn't very sophisticated, but the baby steps aren't about being sophisticated - they're about changing behavior towards money and striving to achieve a set of fundamental financial goals.